Self-Employment Support Scheme appeal dismissed

17 January 2022 by

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R. (on the application of Motherhood Plan) v HM Treasury [2021] EWCA Civ 1703

In a judgment handed down on 24 November 2021, the Court of Appeal dismissed an appeal concerning the lawfulness of the Self-Employment Income Support Scheme (“the Scheme”) which was introduced by the Government in April 2020 during the first lockdown as part of its response to the Covid-19 pandemic.

Background

The purpose of the Scheme was to provide payments for persons carrying on a trade where their business had been adversely affected by the pandemic. The payments were to be calculated by reference to the average trading profits (“ATP”) of the preceding full tax years (2016/17, 2017/18, 2018/2019).

The First Appellant, Motherhood Plan, also known as “Pregnant Then Screwed”, is a registered charity with aims to end discrimination faced by women and mothers by campaigning to change legislation, raising awareness in the media and working with employers to change business practice and culture. The Second Appellant, Ms Kerry Chamberlain, worked as a self-employed energy analyst. In the tax year 2017-18, she took a 39-week period of maternity leave after the birth of her second child, and, in the following tax year, she took a further 39-week period of leave after the birth of her third child. As a result of her periods away from work, her trading profits were reduced.

They claimed that contrary to Article 14 of the European Convention on Human Rights (“the Convention”), read with Article 1 of the First Protocol of the Convention, the Scheme unlawfully discriminated against self-employed women who took a period of leave relating to maternity or pregnancy in any of those three preceding full tax years since the level of support granted to them under the Scheme was not representative of their usual profits.

Whipple J’s decision in the High Court was covered for UKHR Blog here. In summary, the High Court held that the Scheme was not indirectly discriminatory, but that, even if it was, such discrimination was justified.

The Appellants advanced three grounds of appeal, concerning: (1) the finding that there was no indirect discrimination; (2) whether there was a failure to treat differently persons whose situations are significantly different (so-called “Thlimmenos discrimination”; and (3) the Court’s approach to and conclusion that that the measure was justified.

Indirect Discrimination

The Court cited R (SC) v Secretary of State for Work and Pensions [2021] UKSC 26 as the most recent authoritative statement on indirect discrimination in the context of Article 14 and paragraph 49, where Lord Reed stated the following (derived from the judgment of the Grand Chamber in DH v Czech Republic (2008) 47 EHRR 3 (see paragraph 175)):

This is what is described in the Convention case law as ‘indirect discrimination’. It can arise in a situation where a general measure or policy has disproportionately prejudicial effects on a particular group. It is described as ‘indirect’ discrimination because the measure or policy is based on an apparently neutral ground, which in practice causes a disproportionately prejudicial effect on a group characterised by a salient attribute or status.

In the context of Lord Reed’s formulation requiring only that the measure or policy have a “disproportionate prejudicial effect on a particular group”, Whipple J implicitly accepted in her judgment that the Scheme had a disproportionately prejudicial effect on recent mothers, but she nonetheless found that there was no indirect discrimination. The Court of Appeal stated that the “core reasoning” at first instance had been that the measure imposed no hidden barriers to eligibility or in relation to the quantum of payments (which was based on past average trading profits), such that:

The same rule applies to all and it is no harder for a woman who has been on maternity leave to qualify or calculate their payment, than someone who has not. The fact that some claimants will receive lower payments than others reflects the fact of lower earnings in past years; I agree with the Defendant that the reasons for lower earnings in past years, in the context of this Scheme with its stated purpose, are not relevant.

The Court of Appeal considered this analysis against the backdrop of the authorities of Barry v Midland Bank [1999] 1 WLR 1465 and R (Adiatu) v HM Treasury [2020] EWHC 1554 (Admin) (which had been examined at first instance). Barry concerned a redundancy pay-out where the claimant had recently changed to part-time working following the birth of her child. The method of calculation of the severance scheme was less advantageous as a part-time worker and the claimant claimed indirect discrimination on the basis that women, on account of maternity, were more likely to switch from full-time to part-time working. The House of Lords by a majority of 4:1 held that prima facie indirect discrimination had not been established.

After examining the reasoning of the each of the majority speeches in that case, the Court concluded that it was essential to a claim of indirect discrimination that the group to which the claimant belonged should be treated differently from persons not in that group. Further, in deciding whether there had been such a difference in treatment it was necessary to identify the true substance of the measure giving rise to the claim, and that this may involve a consideration of its purpose. In the present case the Scheme worked by using past profits to represent likely hypothetical ‘no-Covid’ profits. The effect placed new mothers at a particular disadvantage because their profit calculations under the Scheme were disproportionately unrepresentative as compared with others. By contrast, in Barry what part-time employees had lost was their part-time earnings; any previous whole career earnings were irrelevant to the earnings that the claimant there would have received but for her dismissal.

Turning to Adiatu, the Divisional Court in that case dealt with whether the rate at which Statutory Sick Pay (“SSP”) was set indirectly discriminated against women and members of ethnic minorities. The claimant’s case was that female and BAME employees were disproportionately represented in the lowest earning groups, were disproportionately likely to be unable to have resources to manage with such a low income, and so were disadvantaged by the rate of SSP by either losing income or having to go to work when they ought not to.

The Court of Appeal held that the essential point was the same as that in Barry. In particular, the SSP was not designed to mitigate the effects of low income, the fact that a claimant had low earnings was immaterial to the issue, and the fact that a higher rate of SSP would be beneficial to those on low incomes could not found an argument that they were materially disadvantaged by the actual rate. Turning back to the present case, the purpose of the Scheme in using past earnings as the measure of those lost hypothetical earnings meant that the past earnings question was not immaterial but in fact crucial.

The Court of Appeal therefore held that Whipple J was wrong to rely on those cases and to find that the use of the ATP measure for the Scheme, prima facie, did not constitute indirect discrimination.

“Thlimmenos discrimination”

Article 14 may impose a positive duty to treat individuals differently in certain situations and a failure to do so may also constitute discrimination – commonly known as “Thlimmenos discrimination”.

The Court of Appeal observed that Whipple J’s reasons for rejecting this part of the Appellants’ case largely overlapped with her reasons for dismissing the claim of indirect discrimination, and so the Court of Appeal was inclined to consider that the reasoning as also flawed. However, it was held that it was not necessary to reach a definitive view given the alternative conclusions reached in respect of indirect discrimination as set out above.

Justification

While the legal approach at the time of Whipple J’s judgment was entirely appropriate, the Supreme Court has since revisited whether the “manifestly without reasonable foundation” was the correct test when considering justification in R (SC) v Secretary of State for Work and Pensions [2021] UKSC 26. The Court of Appeal examined the judgment of Lord Reed in detail before citing Lord Reed’s conclusions at paragraph 161:

It follows that in domestic cases, rather than trying to arrive at a precise definition of the ambit of the “manifestly without reasonable foundation” formulation, it is more fruitful to focus on the question whether a wide margin of judgment is appropriate in the light of the circumstances of the case. The ordinary approach to proportionality gives appropriate weight to the judgment of the primary decision-maker: a degree of weight which will normally be substantial in fields such as economic and social policy, national security, penal policy, and matters raising sensitive moral or ethical issues. It follows … that the ordinary approach to proportionality will accord the same margin to the decision-maker as the “manifestly without reasonable foundation” formulation in circumstances where a particularly wide margin is appropriate.

The Court of Appeal was not persuaded that the reformulation of the law following SC was material to how Whipple J approached the issue of justification. It held that Whipple’s assessment was nuanced, gave respect to the assessment of democratically accountable institutions, and recognised both the need for caution before intervening in areas of social and economic policy and that cogent justification was required for a measure having a differential impact on women. In any event, the Court of Appeal held that, had it revisited the assessment in light of SC, it would have come to the same conclusion that the indirect discrimination was justified.

Comment

The Court of Appeal’s thorough review of the relevant authorities – in particular, Barry and Adiatu – provides clarity to this area of law. What emerges is the requirement to focus keenly on the aim and the substance of the alleged provision, criterion or practice (i.e. the PCP – here, the Scheme) in determining whether it could be classed as indirectly discriminatory. The judgment is to be welcomed as it will prevent reliance on authorities such as Barry and Adiatu in circumstances such as this where the Scheme was clearly indirectly discriminatory.

But even so, the Court of Appeal seems to have been right to uphold Whipple J’s decision as regards justification. The circumstances surrounding the development of the Scheme – namely a global pandemic and impending economic crisis – have to be taken into account. Given the essential requirements of speed, simplicity and verifiability in delivering the Scheme, it seems entirely reasonable to conclude that its impact on recent mothers was not disproportionate to the benefit of the Scheme.

Henry Tufnell is a barrister at 1 Crown Office Row.

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